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Tuesday, May 10, 2016

ANOTHER SURCHARGE FOR FEDEX AND UPS

UPS and FedEx apply another surcharge. Amazon gets another reason to continue taking control of its supply chain. What will retailer competitors of Amazon do?

When it comes to pricing changes, transportation and logistics bellwethers
are usually on the same page. And that was again made clear with changes each
company made for additional handling charges on ground packages.
Last Monday, May 2, FedEx issued an announcement saying the following:
“Effective June 1, 2016. Additional Handling Surcharge. A surcharge applies
to any FedEx Ground package that measures greater than 48 inches but equal to or
less than 108 inches along its longest side. Prior to June 1, 2016, a surcharge
applies to any FedEx Ground package that measures greater than 60 inches but
equal to or less than 108 inches along its longest side. All other Additional
Handling Surcharge size, weight and packaging parameters remain unchanged. The
surcharge remains at $10.50 per package. This change applies to shipments within
the U.S. and from the U.S. to Canada. See the Jan. 4, 2016, FedEx
Service Guide for details.”
And UPS followed serve last Friday, May 6, with this statement:“Effective
June 6, 2016, UPS is changing the measurement that determines whether the UPS
Additional Handling charge will be applied to UPS Ground services packages in
the U.S. The updated 2016 UPS Rate and Service Guide will be available to
download on June 6, 2016. Any package with the longest side exceeding 48 inches,
instead of 60 inches, will be assessed the fee. The Additional Handling fee of
$10.50 remains the same. The change does not impact UPS Air or International
shipments.This change is being implemented due to the additional handling
required for these types of packages in the UPS network.”
An industry stakeholder was blunt in explaining these pricing hikes, simply
saying “they do it because they can.”
Given the ongoing strides e-commerce is making in terms of boosting ground
delivery volumes, coupled with the vast UPS-FedEx duopoly continuing to dominate
the domestic ground package market, it wouldn’t make sense for them not to raise
rates, it seems.
With the duopoly as strong and dominant as it has ever seemingly been, thanks
in no small part to e-commerce gains, along with consumers and shippers like
becoming more comfortable with ordering things online, something which has led
to them ordering larger items that these price changes adhere to, compared to
the “old days,” which saw more orders for smaller items like books and other
things of similar size as well.
What’s more, in some cases, the writing has been on the wall for FedEx and
UPS to male these changes.
FedEx signaled that intention last September, when it first announced its
2016 rate increases, when it said it would be updating certain fuel surcharge
tables at FedEx Express and FedEx Ground, effective November 2. These changes
were made due to what FedEx described as changing industry dynamics, including,
increases in average package size and weight, and increased residential
deliveries.
The company also noted that it planned to up surcharges for shipments that
exceed published maximum dimensions, or unauthorized packages, in its FedEx
Ground network. It explained that unauthorized packages that exceed length or
weight limitations of FedEx Ground “are handled at the option of FedEx
Ground.“If you would look at one of these packages, you would more likely to
expect it to travel in an LTL network,” said T. Mike Glenn, FedEx executive Vice
President, Market Development and Corporate Communications, on the company’s
fiscal first quarter earnings call last September. “It is up to FedEx Ground as
to whether we accept these packages but we felt the change was needed in the
price or the surcharge if we elected to do so.”
As for oversized packages, Glenn said these are packages that have
specifications that are within FedEx’ current service guide features or service,
but have to be longer or heavier than a typical package, adding that they carry
a separate surcharge with the dramatic shift in e-commerce, where more and more
e-commerce companies are electing to ship those packages through networks like
the FedEx network rather than handle them in the store.
“We’ve seen an increase in those types of packages,” said Glenn. “We are
working with those individual customers that are driving that change, at least
the ones that are having the biggest impact and obviously, we always look at
pricing opportunities to mitigate that where needed. So overall, we do an
excellent job of handling those packages in our network but it’s obviously
something we will continue to monitor.”